Comments on: Is It Time to Change or Replace Ocean Shipping Reform Act?

By: Gary Ferrulli

Gary Ferrulli — Tue, 30 May 2017 16:41:57 +0000

Jared, in general agreement with yours. If Alliances go away, so will some more carriers. They are being kept alive by
the alliances. I point again to what happens if Alliances go away, how many carriers can provide anything that
looks like a global presence? 3. Talk about loosing choices, alternatives, port calls, frequency – try 3 global carriers and lose
just one or two more of the “top 15” and serious deterioration of services occurs.
Your last point, cutting costs to be profitable, they have passed that stage. Yes they should be efficient as possible, that is what the
big ships are all about. But if rates don’t go up then a huge problem remains. In the Transpacific, even with the increased rates in new
Service Contracts, round trip revenues port to port of under $1100./40′ still exists. Empty re-positioning costs are over $1. Billion. Those numbers
can’t be sustained even by the most efficient. The terminal costs alone (on in Asia, off on West Coast, on on West Coast off in Asia) are now
approaching $1000. in some lanes and over $850. in virtually all. When was the last time a shipper paid for Terminal Handling charges?
Lowering costs has pretty much been explored and taken advantage of, and oh yes, fuel prices went up significantly. Shippers complain today of
poor service, have been since the start of slow steaming. They are getting what they pay for, poor to mediocre services for low rates.

By: Jared Vineyard

Jared Vineyard — Fri, 26 May 2017 00:08:15 +0000

In reply to Gary Ferrulli.

Thanks for the great comment, as always, Gary. Opportunity for collusion certainly doesn’t suddenly appear because there are three alliances instead of four. The fear people have of collusion within the alliances isn’t new with the latest reshuffle. I was hearing rumblings of it back when Maersk, MSC, and CMA CGM were planning the P3 Network and it’s only intensified as carriers alliances have grown in dominance. Collusion has certainly existed in the last 6 years, but where we’ve really seen it is in the RO-RO market. That’s where carriers have been found guilty of price fixing several times in the last few years. On the container side, there have been price wars, and, you’re right, if there have been attempts at price fixing there, it has failed miserably. Unless some of the carriers at the top were intentionally pushing freight rates way down to drive out some of the competition. The issue of Alliances ganging up through group negotiation against the tug boat operators (and port operators too) is an issue that the FMC is addressing. I’m with you in that I don’t think eliminating carrier alliances is an option. Right now they seem necessary for the carriers to cut down costs and get back to be profitable.

By: Gary Ferrulli

Gary Ferrulli — Fri, 19 May 2017 15:43:02 +0000

A lot is involved here and one has to connect the dots on realities vs. hypothetical, and throw in some factual history.
Start with factual history; the ocean carrier industry had virtual global price fixing authority from governments
around the world for decades, so the FMC “allowing” the limited activities in today’s Agreements is a dramatic
reduction in what was fact for decades.
Why would the ability to collude be enhanced by only three Alliances existing? Four was too may for them to collude?
Back to facts, the last 6 years the container industry has lost Billions, so apparently collusion hasn’t existed, or if it
did, it didn’t work. Can the carriers collude? of course, but the number of Alliances have nothing to do with it.
The complaints today are not from shippers on price fixing, they are from tug operators who fear that the Alliances
will use their combined buying power to drive down and keep prices on tug operations down. A justified fear? maybe,
Is that reason to seek legislation? to do what? eliminate the ability for Alliances to gang up on tug boat operators? or
eliminate Alliances,period? Would either of those actions guarantee there will be no collusion? and folks, wake up, if
you want to see services deteriorate more, more carriers leave the industry, fewer services overall – eliminate Alliances.
How many carriers could be global? – 5 at most and realistically 3. Is that what BCO’s need? .
.